Why are co-working spaces a preferred choice, even for luxury brands

Rajiv Dogra

Co-working spaces have emerged as a major disruptor in India’s commercial landscape. Originally billed as a perfect workplace for the new-age workforce or the millennials, co-working spaces are now gaining popularity even among large global players and Fortune 500 companies, including those in the luxury domain such as Rolls-Royce India, Louis Vuitton, and Jaguar Land Rover. Companies prefer co-working spaces for their relatively affordable infrastructure and the networking and business opportunities one gets while working side by side other organisations and professionals.

Awfis collab zone

Co-working spaces cater to all the aspects of workplace management — hospitality, housekeeping and security. Most co-working spaces have invested heavily in architecting beautiful and conducive work environment and offer 24/7 access to its members. Multi-cuisine cafes, high-tech security, meeting rooms, gym facilities, play areas, high-end furnishings, social and networking events are added advantages.

The Trend

Mr Amit Ramani, CEO and Founder, Awfis

In 2012, Rolls-Royce India realised that its team was getting bigger for its corporate office at Barakhamba Road in New Delhi. It decided to move some of its operations to a serviced office space. “It was the convenience, really,” says John Gay, Senior Vice-President, Customer Business, South Asia- Defence, Rolls Royce India Pvt Ltd. They chose the Avanta Business Centre, a company that provides serviced office spaces, 200 metres from their corporate office. “We were looking for an interim location, which could be used for short or long term.”

Awfis cafeteria

Companies, including luxury brands, are looking at co-working spaces as a tool to establish themselves in a certain city or territory, focus on their core competency and outsource office administration, says Harsh Lambah, Country Manager-India, International Workplace Group (IWG), which operates co- working brands Regus and Spaces. Companies prefer co-working spaces to conventional office spaces as working at the former helps them save 15 to 25 per cent costs incurred for lease, fit-outs, and upkeep of the space.

“Co-working spaces provide grade-A infrastructure at a price that appeals to all sub-segments. The aesthetics, ambience and the overall look and feel in a co-working space is superior to that of any conventional office, thereby attracting many luxury brands as well,” says Amit Ramani, Chief Executive Officer and Founder, Awfis, a network of 30,000 seats across 63 centres in Mumbai, Delhi, Kolkata, Pune, Bengaluru, Hyderabad, Gurugram, Noida and Chandigarh. The company services Mercedes Benz, Hinduja Global Services and Hitachi.

Awfis, Meeting Lounge

According to Sangram Tanwar, Managing Director, Mid-India, Colliers International, a Canada-based global commercial real estate service organisation, today’s clients want flexibility in tenures. “Clients do not want to spend on capital expenditure to make an office usable. They want to avoid the hassle of managing multiple vendors to run an office. Co-working spaces give them easy access to offices at multiple locations,” he says.

As creating a great work culture even for those working from remote locations, has become important for companies across segments, there is an active need for evolved workspaces. “Another major contributor is the growing need for collaboration among teams to spur innovation, creativity and engagement. The common areas, including play areas, and socializing events play a crucial role in driving the agenda,” says 27-year-old Ishaan Khosla, Partner, Huddle, a Gurugram-based startup incubator.

The growth curve

Avanta India Park Central

The co-working sector has emerged quite rapidly and as on date is the second largest sector with 14 per cent share in the overall lease-based infrastructure in India, says a JLL-FICCI report titled Co-Working — Reshaping Indian Workplaces. “It is, therefore, inevitable for luxury brands to move to premium co-working zones. As far as, premium retail and office space industry is concerned, moving into a co-working space is a huge advantage,” says Umesh Uttamchandani, Co-Founder and Chief Growth Officer, DevX, which is one of the largest co-working and office spaces in Ahmedabad, Gujarat.

“Initially in India, we had co-working spaces with only startups in mind but now well-developed and luxury office spaces have also joined the trend of working together along with the others in a shared space. The industry is expected to grow by 40-50 per cent by the end of this year. A paradigm shift in the co-working industry is on the anvil as an era of flexible office spaces, wherein space allocation is not fixed unlike in traditional offices, is here to stay,” says Nakul Mathur, Managing Director, Avanta India, a company that provides serviced office spaces. It has recently taken 20,000 sq ft office space on lease in central Delhi to open a new co-working centre with an investment of Rs10 crore, as part of an expansion plan to encash rising demand of flexible workspace.

Developers, too, are focusing on this aspect, as even non-resident Indians (NRIs) are inclining towards co-working spaces as investment options, says Gurugram-based Ashish Bhatia, Managing Director and Founder, India Accelerator, which runs mentorship-driven incubation and acceleration programmes for startups. “We have been quite active in the co-working sector and are aware that NRIs are coming forward and investing in commercial spaces to launch co-working spaces in tier-I and tier-II markets,” he says.

The shared workspace segment is slated to grow, with over 13 million people expected to work out of co-working centres, by 2020 in India, as per a report by CBRE, a commercial real estate services and investment company. With various arrangements such as straight leasing out properties, that is an implied contract by which an owner can lease out a specific asset for a stipulated period in return of specific periodic rentals or lease payments, sharing revenue with developers to minimise financial risks and obligations. Space owners invest in fit-outs infrastructure and build a centre. The profits are shared with the landowner, thus utilising the underutilised spaces, says Ramani. “More and more investors are realizing this and are infusing funds in co-working spaces. Innovation, collaboration and flexibility are the essence of shared workspaces and have led to the massive growth of the segment,” says Ramani, adding that flexible workspaces will be a game changer, attracting the interests of developers and institutional players over the next three to five years.

Awfis, Flexi Desks

As far as the internal rate of return (IRR) is concerned, it is expected to be anywhere between 15 and 20 per cent, as per Colliers. Co-working is indeed a growing opportunity for the builder and investor communities, says Khosla. “If done right, there is a scope for tremendous growth. With the advent of existing operating players, partnerships can be quickly built to tap into this segment.”

The roadmap

Market size for co-working spaces is huge with the requirement of more than 16 million seats to effectively run various businesses. By 2025, it is expected that around 42 per cent of the population in India will work in urban centres and, therefore, the demand for office space will increase manifold. With economics playing on the mind of many new businesses the demand for shared office space will grow tremendously in the next decade. India has around 300 co-working operators, out of which only a few have luxury co-working spaces. But this will change soon.

Every company wants an office space that takes care of all the needs of its employees. A space like this needs lots of investment in terms of time and money. And luxury co-working office spaces are filling in to meet the need. There are less than 100 branded co-working spaces operating in India at present, but the good news is that this number is expected to expand by four times in three years, says Mathur.